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Belgian Constitutional Court annuls fairness tax

In its judgement of 1 March 2018, the Belgian Constitutional Court ruled that the fairness tax is unconstitutional. Hence, it annulled the fairness tax. This decision follows a series of actions on both the national and European level (for our previous coverage on this subject, click here). The annulment does not have a retro-active effect, except in specific situations.

Fairness tax: what is it?

The fairness tax was introduced by the Act of 30 July 2013 and is applicable as of assessment year 2014 (financial years ending 31 December 2013 up to and including 30 December 2014). It is a separate assessment in the Belgian corporate income tax at a rate of 5.15% on dividends distributed by large Belgian companies or Belgian branches of foreign companies. The fairness tax applies if notional interest deduction and/or tax losses carried forward are offset against the taxable basis for the respective taxable period.

Complaint before the Constitutional Court

In January 2014, a complaint was launched by a Belgian company against the fairness tax with the Belgian Constitutional Court, arguing that the tax would infringe Belgian constitutional law, the Treaty on the Functioning of the European Union and the European Parent-Subsidiary Directive.

Judgement of the European Court of Justice on 17 May 2017

Within the framework of the respective procedures, the Constitutional Court has asked the European Court of Justice to rule whether or not the fairness tax violates European law. In its judgement of 17 May 2017, the European Court of Justice ruled that some aspects of the Belgian fairness tax are violating EU law.

Decision of the Belgian Constitutional Court on 1 March 2018

In its judgement of 1 March 2018, the Constitutional Court ruled that the fairness tax infringes Belgian constitutional law. Hence, it annulled the fairness tax. The annulment does not have a retro-active effect, except in specific situations whereby companies have received dividends which have been re-distributed. For those specific situations, in case no tax claim has been filed yet, the Constitutional Court’s judgement opens a new period of six months to challenge the fairness tax.

For cases whereby companies have not received dividends that have been redistributed, the Constitutional Court maintained the effect of the annulled provisions for the assessment years 2014 – 2018. This means that, for those cases, the fairness tax would remain due for the aforementioned period, notwithstanding the fact that an administrative or judicial appeal has been filed.

To discuss the consequences for the Belgian companies or Belgian branches of your group, please contact your PwC tax consultant.